The company hired to transform Miami International Airport's drab food and beverage concessions into a first-rate, brand-name operation secretly paid political insiders $1.7 million to maintain its hold on the mammoth contract, The Herald has found.
The insiders, minority partners with ties to Miami-Dade Mayor Alex Penelas, were supposed to run eight restaurants as part of a program to help disadvantaged businesses. But behind the scenes, Host Marriott Services Corp. agreed to pay them $33,225 a month so the company could keep all of the concessions - while the minority partners operated none.
State and federal investigators are examining whether the arrangement, orchestrated by lobbyist Christopher Korge, was devised to skirt federal laws on minority hiring at airports.
They are trying to determine whether the partners were used as a front for Host.
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The 10-year concession contract is one of the biggest in the county, bringing in $40 million a year in sales.
When Host won it in 1998, it was required to partner with minority entrepreneurs and help them gain a foothold in the airport food industry. A third of the revenue was slated for these smaller firms.
The company joined a group of Korge's friends, who formed a "disadvantaged business enterprise, " or DBE, and promised to build eight restaurants.
Reports filed by the airport to the FAA - which requires the minority participation - appear to show that this happened right away. The airport's director of minority affairs wrote that the minority concessionaires were doing great, raking in $4.1 million in gross revenue during the first five months of the contract.
By 1999, they were apparently doing better than almost any other group of disadvantaged businesses at the airport, bringing in $12.3 million in sales from their restaurants.
In fact, they hadn't opened any.
The reports were wrong.
Host didn't give up any space to the minority partners for four full years. And the minority partners didn't open a single restaurant until last January.
FBI and Miami-Dade police look for fraud, concealment
The FBI and Miami-Dade police detectives have been working to establish whether the venture committed fraud during the long delay. They are investigating whether it lied about minority involvement to get the contract and whether the airport's director of minority affairs, Esterlene G. Lewis, intentionally concealed the scheme by falsely certifying minority participation.
Lewis' reports eventually reflected reality. For 2000, the percentage of gross revenue allocated to Host's partners in her FAA report: zero. She said the wrong numbers were an accident. She was simply following her predecessor's procedure for calculating numbers. "I have not done anything wrong, " she said in an interview.
The partners deny wrongdoing as well, saying their business will ultimately prove "the greatest DBE success story at MIA."
"Yes, it is true that it has taken a long time to complete this project, in fact two years too long. But everything at MIA gets delayed, " they wrote in a statement. "It would be simply untrue for anyone to say [we are] a front for Host."
But a Herald review shows how a national company quietly maneuvered to keep its grip on a lucrative contract, and how lobbyists used a minority business program to make money for themselves.
The food contract is the most important piece of a program to bring MIA's generic and outdated shops into the modern, mall-like world of airport retailing.
The stakes are huge. With new shops, the county could generate millions more in revenue, offer a top-notch first glimpse of Miami to the millions who come through the airport, and maybe even lure back some passengers long ago turned away by the notoriously bland fare.
With the disadvantaged-business requirements, the concessions could also give legitimate minority entrepreneurs one of the best chances in Miami-Dade County to build a stable of thriving businesses.
Instead, Korge shaped it into a virtual sieve, gushing public money into his and his friends' pockets, and undermining a program meant to cultivate struggling firms. Korge is one of the mayor's top fundraisers and advisors, and has wielded unparalleled clout, particularly on airport matters, ever since Penelas became a commissioner 12 years ago.
From the food and beverage concessions, millions flowed to political people who could help Host keep the contract:
* Everyone knew Korge was getting paid as a lobbyist for Host. What they didn't know is that the $1.6 billion corporation gave Korge a 10 percent cut of whatever it ultimately made on the MIA deal, an extraordinary price for political influence. He has made nearly a million dollars from this part of the deal so far, sources said.
* The company handed off another 10 percent to the wife of BellSouth Vice President Tito Gomez, another Penelas confidante and fundraiser. Paula Gomez has made about the same amount as Korge, sources said, though she has few defined responsibilities in the venture.
* Even the minority partners ponied up. To Korge, they signed away 10 percent of whatever cash they would take home from the business. They gave another 10 percent to lobbyist Rodney Barreto, another leading power broker at County Hall.
The payments were kept from public view. Barreto never registered as a lobbyist for the group, a potential violation of county ethics rules. Even though he was their "top political advisor, " he said he didn't register because he never lobbied anyone.
Unlike many disadvantaged businesses, the minority insiders in the food contract have not been battling to start their own ventures at the airport for years. They already had millions in county contracts. And they don't lack connections.
"If this is disadvantaged, I need to go back to school, " Commissioner Natacha Seijas said when the contract came up for a vote. Working under the name World Wide Concessions (WWC), the partners are:
William Perry III and his partner, lobbyist Dewey Knight III, both key political advisors to Penelas with pieces of several county contracts; Daysi Muñoz, wife of Armando Muñoz, a friend of Penelas; Millie and Esteban Bencomo, caterers with millions of dollars in county contracts; Jorge Carbajal, president of a supermarket in Liberty City; and Jose Alberni, head of a company that ran 18 Burger King restaurants until it collapsed in bankruptcy several years ago.
Perry jumped into the mayor's race in 1996, draining votes from Penelas' main opponent, Arthur Teele, who accused the mayor of using Perry to diminish his political base.
Payments were invested in the business, they say
The minority partners say most of the payments they received from Host while not operating restaurants have been invested in the business. So far, the partners have pocketed about $278,436 of the $1.7 million. They have paid the lobbyists $27,843.66 each thus far and compensated Korge for other work, but didn't say how much.
"I have performed numerous valuable services, " Korge wrote in a statement. "I have assisted [the group of partners] as a consultant in the financing and development of its space."
Barreto added that "an equity stake in a company in lieu of compensation is a well-accepted business practice."
Penelas, who voted to give the venture its first contract in 1994, said he knew nothing of the deal.
"I don't get involved in contracts. Period. End of story, " Penelas said. "I don't like the idea of public dollars being spent to pay lobbyist fees. This is one of the reasons I've advocated an airport authority. You cut the politicians out of all these issues."
The minority partners first joined Host in 1994 as paid apprentices. While Host managed the airport's concessions, they would learn the workings of the industry.
Four years later, Host won a new, 10-year contract worth millions. This time, the commission was demanding well-defined minority participation, so Host promised that the minority partners would operate all of their restaurants, with financing guaranteed by the company.
That promise is yet to hold up.
Host didn't give any restaurant space to the minority partners until May 2002 - fully four years into the contract. All the while, Host was operating concessions in those spots, which brought in at least $4 million a year, according to records and airport officials.
The minority partners opened their first restaurant, Chili's Too, in a previously unoccupied spot, last January. They opened four more in October and took over two existing concessions.
Not until early next year, almost halfway through the contract, are all of the restaurants scheduled to be up and running.
The minority partners would not comment individually, but collectively provided written answers to The Herald's questions.
In the statements, the partners said they were unable to take over any existing concessions right away because they didn't have the financing, employees or supply chain. That took time, they said.
Instead, they arranged for Host to pay them every month so the company could keep using the space, while they worked behind the scenes to get their new restaurants going.
"The $33,225 per month fee paid by Host provided [World Wide Concessions] the additional money/capital it desperately needed to diligently proceed with the development and operations of the new national brands in its space, " they wrote.
But the payments were hidden. In a disclosure to the airport, there was no mention of them. Moreover, the signed document said there were "no other agreements" between Host and the minority partners - a false statement in light of the other agreement to pay the $33,225 a month.
"The payments to the minorities while no work was being done, I can assure you we did not know that was happening, " said Assistant Aviation Director Mayra Bustamante.
Such money-for-no-work arrangements can disqualify a disadvantaged business.
The firms must perform a "commercially useful function" and be a completely independent business, according to the federal code governing disadvantaged business enterprises.
The partners blame missteps by the airport that delayed the grand opening of Chili's Too for years. "Unfortunately, the airport's actions and inactions had caused a delay of approximately ten months, " they wrote The Herald.
They say permits were delayed, and airport staff flip-flopped on how long they could have the space, throwing off their financing plan. They say they didn't want to open any of the other restaurants - which would have been much easier to do - until they got the Chili's going.
Airport officials say there was no excuse.
"I don't understand why it would have taken so long, " said Aviation Director Angela Gittens, who took over last year. "I would have thought that with their experience under the earlier management agreement, they should have been able to assume control over some of the restaurants right away."
County Commissioner Dennis Moss, who now heads the committee overseeing the airport and voted against the Host contract, said it seems the disadvantaged parters were sidelined, as they are in many airport contracts.
"The prime contractors have set the rules of the game: How can we meet the DBE requirements and still control the entire deal?" he said. "They identify minority subcontractors and march them before the commission. As soon as they get approval, the DBE's are shut out."
As investigators here look into whether that was the intention from the start, they are focusing on Korge's role in structuring the arrangement.
So far, Lewis, the airport's minority affairs director; the disadvantaged partners; and Host's Miami general manager, Edward Wilcox, have retained top criminal-defense attorneys.
A spokesman for Host - now called HMSHost Corp. - refused to comment. "There is an ongoing investigation in this matter and we are cooperating with investigators, " said the spokesman, David Milobsky.
The minority partners say the inquiry is misguided. "It is obvious for any reasonable person to see that World Wide Concessions has diligently pursued the completion of its food facilities, " they wrote.
They say they hired architects and applied for franchises in 1999, but their whole plan fell through because of the airport's waffling on their Chili's space. And they say the cuts they gave to Korge - a lawyer - and Barreto were for legitimate work.
"Mr. Korge's main responsibility was to act as WWC's top business advisor. As our business partner he advised us on virtually every aspect of the development and financing of the project."
They called Barreto their "top political advisor."
The minority partners say they offered a share of their take-home profits to Barreto and Korge because they could not afford either of the lobbyists' normal fees.
"Any suggestion that [we] should not be entitled to seek, get and retain the best advice like other large businesses is simply unfair, " they wrote.
ROLE OF LOBBYISTS
They have been criticized for their influence at airport
For years, reformers have said that lobbyists exert far too much control at the airport, the very engine that drives Miami-Dade's economy. Lobbyists raise vast amounts of money for commissioners, who make all the big decisions on contracts at the airport.
"The lobbyists exert undue influence on the process, " said J. Ed Bell, vice-chair of the Blue Ribbon Aviation Committee, which released a report on MIA two years ago. "As a result, it's more of a political operation than a business operation. You don't get even-handed decisions.
"And everything we said then applies today."
Korge is the unofficial czar of airport lobbyists, controlling most of the major contracts; Barreto, a force of his own, regularly works with him. Both have grown exceedingly wealthy and influential since Penelas first took office in 1990.
Barreto, a former police officer, is now a key fundraiser for Gov. Jeb Bush and owns a coastal inn in Maine, an $880,000 vacation home on Key Largo and a half-million-dollar 54-foot yacht. Korge is now a major fundraiser for the national Democratic Party and has hosted former President Bill Clinton and former Vice President Al Gore at his $1.4 million Pinecrest home, which boasts such furnishings as a $63,000 Persian rug.
Barreto and Korge helped put together the partnership overseeing MIA's $5 billion expansion. They also represent the joint venture running the airport's duty-free stores. The county inspector general reported early this year that the minority partners in that venture did little but collect money.
In the case of the minority food team, it is still unclear what services some of the individual partners have provided - even now.
They say, as a whole, that they are putting in a solid work week. Perry is there every day. Knight works three days a week. Carbajal works six days a week, and Alberni works "full time, " as does the general manager they hired, Pedro Amaro, who is a business partner of the Bencomos.
But for some of them, airport parking records suggest otherwise. The records document when one enters or exits any airport parking lot using a pass.
Perry - who has major parts of two million-dollar airport contracts - parks there for less than five hours a week.
He explained to The Herald that his parking pass did not work on a few occasions, and that at other times he forgot to bring it and had to pay to park.
"I am a hands-on working partner/owner that spends both quantity and quality time in the daily development of the facilities, " he wrote. Alberni is the only original partner who is parked there for close to a full week, while Carbajal parks for about 11 hours a week, the records show.
The Bencomos don't have a parking card - or even the airport identifications required to visit the majority of their restaurants, which sit behind security checkpoints, airport officials said.
Knight and the Muñozes don't have parking cards either. They are trying to get their parking permits, and are just paying for parking now along with the general public.
So is Paula Gomez, who is considered a minority partner, though she has a different agreement than the rest. Host said she would be "responsible for the full scope of all activities associated with the day-to-day decisions and operations of all Burger King Restaurants."
But a reporter who visited the two Burger Kings ostensibly run by her found otherwise.
"Paula Gomez, I don't know who that is, " said Charles Hemme, the assistant manager of the Burger King in the airport's central Concourse E. Tito Gomez, speaking for his wife, said Host decided to make her duties more general. "She actually meets Mr. Wilcox [Host's Miami general manager] on a regular basis, and with others out there. She sits in on meetings with airport officials. She is well aware of the entire operation."
As for responsibilities: Paula Gomez has to pay off her share of a loan that Host took out. She does not have any restaurants, departments, tasks or staff people she directly oversees.
"They have people who are experts at that, " her husband said.